The Nicu Marcu effect in the RCA market - transporters and farmers have been protesting for a week

George Marinescu
English Section / 16 ianuarie

Photo source: facebook / Licsari Costinel-Manuel

Photo source: facebook / Licsari Costinel-Manuel

Versiunea în limba română

The new management of ASF is looking for solutions to reduce the value of RCA policies Alexandru Petrescu, president of ASF: "We are working on bonus malus: we will develop a series of subdivisions and circumstances that allow for more price gradations; we are also discussing the interruption of RCA where there are seasonal activities"

The faulty management of the former management team of ASF, headed by Nicu Marcu, with particular consequences in the insurance market, where in recent years we have witnessed the bankruptcies of the companies City Insurance and Euroins Romania, its negative effects are still felt, especially in the market RCA. The increase in the price of RCA policies - the so-called reference rates approved in the last three years by the Marcu team is one of the reasons why farmers and transporters have been blocking the belts of the main cities in the country and the belt of the Capital for almost a week. Farmers argue that for new agricultural machinery, the state should set a lower RCA price because, due to the current calculation system - which focuses on the vehicle and not the driver - the rates are exorbitant for agricultural companies (in some conditions the value of the policy is higher than the value of the agricultural machinery) and have a negative impact on their activity. Transporters are also dissatisfied with the increase in RCA, which, for example, for a 40-ton dump truck, has increased from 7,000 lei per year to 12,000 lei per year. That's why Augustin Hagiu, the president of the Federation of Romanian Transport Operators (FORT) requested the capping of the value of compulsory automobile liability policies (RCA), as an emergency, at 5,000 lei for B0 class vehicles (the class that refers to new policyholders, without damage history).

Under these conditions, the demands of farmers and transporters regarding the RCA represent a real test for the new management of the Financial Supervisory Authority, less than a month after assuming the mandate. However, Alexandru Petrescu, the president of ASF, announced at the end of last week that the Authority is working on a set of measures that will ultimately result in the reduction of RCA.

Alexandru Petrescu declared: "We are working on a document of measures. Some will be part of internal rules, so they will have a short implementation period, other measures relate to changes in legislation. We are working on bonus malus: we will develop a number of subdivisions and circumstances that allow for more price gradations. We are also discussing RCA interruption where there are seasonal activities. We are in discussions with the insurers to have a generalized level, because there are exceptions, and payment in installments for RCA. All homework is on the table and I trust that we will find a solution eventually. All these measures are designed to have as a final result the reduction of RCA".

Against the price of RCA policies

Regarding the price of RCA policies, the National Union of Insurance and Reinsurance Companies (UNSAR) claims that RCA insurance prices are capped at the level of those from the end of February 2023 until March of the current year. Moreover, the insurance companies state that out of 100 lei collected on RCA, 77.3 lei go towards the payment of claims, according to the official data of the ASF published for the first semester of 2023.

UNSAR representatives specified in a press release: "According to the ASF report, the rate of expenditure for acquisition and administration for RCA is 26.97% (page 31), and not 75%, decreasing from 32.59% to the 1st semester of 2022 and from 33.12% in the 1st semester of 2021".

Instead, the representatives of the Confederation of Authorized Operators and Transporters from Romania (COTAR) believe that in reality the situation is different, stating that only 25% of the RCA policy price represents the payment of damages, and 75% represents what the insurers collect. All this while, according to the employers' confederation, the number of accidents involving the payment of RCA damages decreased between 2019 and 2022 from 400,358 accidents to 341,470 accidents.

In a press release, COTAR representatives claim that a vehicle with a cylinder capacity of less than 1200 cmc (cubic centimeters), with a driver under 30 years of age, the compensation expenses included in the RCA price (risk premium) are 539 lei, and at this value various administrative costs of the insurance companies are introduced, the final reference price reaching 1,939 lei (gross reference premium).

According to the reference rates published by ASF, for trucks the price of an RCA policy was 8,609 lei for companies and 6,303 lei for individuals.

At the end of last week, Augustin Hagiu, the president of FORT, said: "Carriers rightly cite the fact that RCAs have exploded and indeed tripled in the last 3-4 years."

Marcel Boloş: "Inducing a bankruptcy risk in the insurance system I don't think Romania lacks at this moment"

In other words, the current situation is a setback from the period when ASF was badly led by Nicu Marcu, and the effects of the City Insurance and Euroins Romania bankruptcies on the RCA policy market are only now being truly felt, negatively impacting the business environment.

However, both Nicu Marcu and the other members of the former management of ASF were not held accountable for the way they supervised the insurance market, they completed their mandate, and now the hot potato of RCA policy prices must be resolved by the new president Alexandru Petrescu and the other members of the Authority's leadership.

Regarding solving the problem regarding the price of RCA policies, Marcel Boloş, the Minister of Public Finances stated: "The problem must be further discussed with the ASF, because here, as with us, there are calculations that are made: how much does the person pay as a premium insurance and what expenses the insurers have. Inducing a bankruptcy risk in the insurance system I don't think Romania lacks at the moment and that's why we have to understand that all these types of measures and claims must be analyzed in the context of the commitments assumed with the financial institutions and in the context of the risk that generates it".

However, it seems that the farmers' representatives are not interested, as long as one of their leaders, Dănuţ Andruş, declared after the negotiations with the ASF leadership and the Minister of Finance that no agreement was reached, that their requests are not taken into account calculation and, under these conditions, they will continue the protest indefinitely, until the state representatives understand that "your inability to manage a country is real".

Despite the accusations brought by the protesters, yesterday Prime Minister Marcel Ciolacu had a working meeting with the ministers involved in the negotiations with the transporters and farmers, the purpose of the discussions being to expedite the development of normative acts to put into practice the solutions agreed by the two parties through the minutes concluded. The members of the Executive presented how they prioritize these legislative projects, so that in the next Government meetings the first government decisions and ministerial orders containing the concrete measures agreed to support farmers and transporters are adopted.

In a press release issued by the Government, it is stated that Prime Minister Marcel Ciolacu conveyed to relevant ministers: "We continue to negotiate in good faith with the protesters. We are fully open to dialogue, all the way to measures to reduce tax evasion. This is the red line we cannot cross."

The quoted source shows that the new management of the ASF communicated to the Government the willingness to meet again with the protesters, after they failed to reach the meeting on Sunday, and that it sent them a set of concrete proposals aimed at improving the effort financial for the acquisition of RCA.

In all this context, the mediator established by the Romanian Constitution is missing. President Klaus Iohannis has not yet expressed any intention to call the representatives of farmers and transporters and those of the government, as well as insurance employers and more, to the Cotroceni Palace for mediation. Klaus Iohannis would have an average, especially since the list of demands is very long, with the farmers having 14 points, to which are added those of the transporters who accuse the generalization of the e-Transport system and the e-Invoice system.

Farmers' claims, on the table of public authorities

The Alliance for Agriculture and Cooperation, an organization formed by the PRO AGRO National Federation, the League of Agricultural Producers' Associations from Romania - LAPAR, the National Branch Union of Cooperatives in the Vegetal Sector - UNCSV and the Farmers' Force Association - AFF, submitted to the Ministry of Agriculture and Rural Development the list of problems raised by farmers and cooperatives, a list that would have been transmitted in the last two years to several government structures is shown in a press release sent to the Editor yesterday.

The farmers' representatives draw clear, short deadlines for the settlement of claims by the public authorities and, from that list, it is clear that they are not willing to make concessions and that they will continue the protests until their grievances are met.

Among the farmers' demands are the urgent payment by APIA of agricultural subsidies, new exemptions regarding crop rotation (GAEC 7) and leaving 4% of the farm surface as uncultivated land (GAEC 8), compensation for the losses suffered by the affected Romanian farmers of imports from Ukraine, reintroduction of customs duties for goods originating in Ukraine, clarification of the situation regarding agricultural goods originating in the Republic of Moldova, updating the value of state aid regarding the reimbursement of excise duty for diesel purchased and used in agriculture. Regarding Ukrainian grains, the Government stated yesterday in a press release that from October 2023 until now, no Ukrainian grains have entered the domestic market in Romania, it is only about transit to the Port of Constanţa, from where the goods left for export.

The favorable settlement of some of the demands of the farmers could disrupt the entire economic environment in our country, as it would create inequities between agriculture and other economic sectors. An example of this is the claim for subsidized interest loans for working capital and farm investments, with a maximum interest margin of 2%, as well as carefully supporting distressed farmers who are currently unbankable.

Another demand that requires clarification from the protesters and the authorities is the same regarding the additional use of the temporary Ukraine framework for the grant to all farmers for the emergency payment of support of 100 euros/ha/UVM for all agricultural crops in the agricultural year 2022- 2023 (spring crops and autumn crops), by promoting, until May 31, 2024, an emergency ordinance in this regard to declare a state of force majeure in agriculture at national level. The respective payment request, for all farmers and for all crops may not have coverage in reality, as long as not all farmers were affected during the respective agricultural year and not all crops were affected, major damage being registered especially to crops sown in the spring.

Another claim, the resolution of which would lead to an unwanted exception from the legislation in force, is that regarding the exemption of agricultural machinery and equipment used for a maximum of 60 days a year in circulation on public roads, from the obligation to carry out periodic technical inspection. The farmers request that the claim be resolved by January 31, 2024. We believe that no authority can assume this, because there are still very old agricultural machines and equipment in the countryside, whose presence on public roads represents a real risk for other road traffic participants.

Farmers also request the reintroduction of fiscal facilities for agricultural employees, facilities that were reduced by the Government through law 296/2023 so that our PNRR allocations are not blocked by the European Commission due to non-compliance with the budget deficit target, a deficit that is extremely to lift.

E-Transport and e-Invoice, challenged by protesters

Regarding the claims that represent the red line over which Prime Minister Marcel Ciolacu declared yesterday that he will not cross in the negotiations with the representatives of farmers and transporters, they refer to the generalization from January 1, 2024, as an effect of law 296/2023, of the systems Ro e-Transport and Ro e-Invoice, intended to lead to the reduction of tax evasion in our country, evasion which, according to the recent statements of the head of the Government, is the largest in the European Union and amounts to 10% of the Gross Domestic Product, i.e. over 160 billion lei. However, both the e-Invoice system and the e-Transport system are intended, according to the Government, to monitor the sale and transport of products with a high risk of tax evasion on the territory of our country.

However, the transporters' representatives requested in the last few days that the Ro e-Transport system be applied only to goods with high fiscal risk in accordance with the provisions of the European Directive 2006/112, and the farmers' representatives requested that the Ro e-Invoice only concern companies that have annual turnover of at least one million euros. Moreover, it is desired to review the tax legislation, regarding the taxation of companies with a turnover of over 50 million euros, according to a press release issued by the Romanian Farmers' Club.

Those demands were refused by Prime Minister Marcel Ciolacu, because they contradict the Government's policy on reducing tax evasion, a fact that led Dănuţ Andruş, one of the farmers' leaders, to declare: Unfortunately, we have a list of demands on agriculture and transport, and from those claims, only one claim was accepted, the one with the profit reinvested in the farm and in transport. This is what the minister understands to support the Romanian economy, not being able to justify the incompetence of the state to manage the public money. All have been accepted, but none is possible. That's the bottom line. Everything is motivated by the European Commission, everything is motivated by legislation. The minister sends us to those who wrote the PNRR. (...) Our problems are not only related to agriculture or transport, they are related to all state institutions, including the National Bank. There are rules made that we can no longer bear. We are no longer bankable, we no longer have the possibility to carry out our activity in the country. That's not possible".

Last night, at the close of the edition, the negotiations between the relevant ministries and the protesters continued, and today it would follow that the representatives of the main employers' associations in agriculture and transport would also participate in the dialogue, according to the requirement formulated yesterday by Prime Minister Marcel Ciolacu.